February 21, 2002: A landmark report from the Brookings Institution confirms what Oregon growth management advocates have said for years: even though urban growth boundaries limit the supply of land for development, those limits do not play a significant role in housing price increases.

In fact, according to the study, sound growth management policies like Oregon's pioneering planning program provide more affordable housing than traditional land use policies.

"Market demand, not land constraints, is the primary determinant of housing prices," the report states. The report characterizes as "far too simplistic" a common refrain of the development industry-the claim that limiting the supply of developable land reduces the supply of housing, thereby raising housing prices. In fact, "despite limiting the amount of land, Portland's growth management policies actually increase housing supply relative to demand."

"Growth management, at best, incorporates deliberate policies to assure not only adequate land supply but also a range of housing types and densities. This pro-diversity strategy is, in fact, at work in metropolitan Portland," the report continues.

The intent of the report, titled The Link Between Growth Management and Housing Affordability: The Academic Evidence, "is not to condemn nor promote the practice of urban growth management." However, the evidence it cites from dozens of academic studies effectively dismisses some of the standard arguments used by opponents of Oregon's land use laws-including the popular myth that housing price increases in the Portland region have outstripped the national average.

"This report demolishes the tired argument that urban growth boundaries are to blame for a supposed crisis in housing affordability," said Mary Kyle McCurdy, urban development specialist with 1000 Friends of Oregon. "Realtors, homebuilders, and other opponents of good growth management are going to have to dredge up another bogeyman to scare people with."

The report does note that "both traditional land use regulations [e.g., exclusionary large-lot zoning] and growth management policies [including Oregon's land use laws] can raise the price of housing." However, traditional regulations raise prices by raising the cost of providing housing, or by restricting supply, or both. On the other hand, to the extent that growth management policies lead to increased housing prices, they do so by making places more desirable and thereby increasing housing demand, not by increasing land prices through land constraints.

"After all," the authors write, "if one of the primary purposes of growth management is to increase the desirability of the subject community, we should expect prices there to rise but not because of supply-side constraints."

Among the report's findings:

· Housing demand and job growth, not land constraints, are the primary factors in housing price increases.

The report specifically notes that housing price increases in Portland are "more attributed to increased housing demand, increased employment, and rising incomes than its urban growth boundary."

· Since the late 1970s, "Portland's housing prices rose at the same rate as those of its peers (about 30 metropolitan areas)." Since a a spike between 1990 and 1994-which economists attribute to rapid increases in jobs and wages, not to the UGB-"Portland's housing prices have flattened to a level below those of other large metropolitan areas."

Other reports have demonstrated that over the last couple of decades, not only have Portland's housing prices risen at a rate similar to comparable cities, but so have the prices of land for single-family homes (e.g., Urban Land Institute, 1998 ULI Market Profiles: North America), and that land prices constitute a relatively small portion of housing prices (1999 Oregon Housing Cost Study).

· Growth management programs like Oregon's "can also make housing more affordable by lowering public infrastructure costs and minimizing regulatory delays."

· Because Oregon's land use program balances urban growth boundaries with other mechanisms designed to increase the supply of housing within the boundaries, it "has been effective in reducing the potential negative supply-side effects associated with growth management."

· Traditional indicators of housing affordability ignore important factors like transportation costs, better access to jobs, and proximity to other amenties.

For example, a rule of thumb is that to be affordable, the cost of housing should not exceed 30% of household income. But the typical household spends 44% of its income on housing plus transportation. Yet if a household spent nothing on transportation, but 40% of its income on housing, that housing would be considered "unaffordable" by many-even though that household is better off overall than the average.

· Unlike Oregon's growth management policies, traditional land use controls (including large-lot zoning and local regulations reducing the availability of rental housing) "have been shown to limit the ability of low-income households . . . to find suitable housing in decent neighborhoods"--indeed, they have often been designed for precisely that purpose. Sound growth management, on the other hand, constitutes "an attempt to regulate land uses in ways that do not result in social exclusion."

READ THE REPORT at www.brookings.edu/urban

FOR MORE INFORMATION, contact: Mary Kyle McCurdy, (503) 497-1000

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